Trek Exec on Trends, Social Media, and Why a Skunkworks Failed

February 24, 2016

InnoLead: I have to ask because I’m a Trek bicycle owner. I’ve never been to the headquarters there. I imagine it being the place where everybody is biking to work, and probably biking on their lunch hours, and testing bikes throughout the course of the day. What is it actually like?

Chad Manuell: Absolutely. We have a very strong culture of commuting, and riding at lunch, and riding before and after work. We have several hundred acres of cross country and really extreme mountain bike trails right across the street from us here. You can be doing a lot of mountain biking at lunch as well as commuting before and after work.

InnoLead: That sounds great. Tell us a little bit about your role there. I know your title is Director of Bicycle Engineering. Is that also an R&D-oriented role?

Manuell: Yes. Engineering does all the engineering roles, from the concept creation all the way through production support. We have people that work in every aspect of product development.

InnoLead: About how many people in total? I think the number I had seen was 1,800 employees. How many of those are in your group?

Manuell: We have about 108 people in our group across the globe depending on how many interns we have at the time. We have anywhere between five and twelve interns helping us out throughout the year. We have offices in Taichung, Taiwan; Shenzhen, China; Kunshan, China; Holland; California; and Wisconsin.

InnoLead: Tell us a little bit about how the people in those offices work on developing new products and how R&D happens there at Trek.

Manuell: We work for several business units within Trek. They have a product manager who leads the business. Our engineers are part of the team doing their best to make those teams successful. They have to look at both short-term projects and long-term projects…

InnoLead: Trek is now involved in bike-sharing. Tell me about that…

Manuell: Trek partnered with a company a few years back, and eventually became the sole owner of BCycle. BCycle is a bike sharing brand – we have a BCycle system in Madison, Wisconsin, one of the most recent ones. A couple of the most recent are Philadelphia and L.A.

You’ve probably seen bicycle sharing systems in larger cities across the US, large and small, maybe even on campuses. It gives another alternative for transportation within cities and on campuses.

InnoLead: People are typically paying monthly or annual membership fee, or maybe on a campus it’s provided free. I’m guessing for you guys, it’s a distribution channel and a way to generate revenue from your bikes that isn’t necessarily selling them to a consumer.

Manuell: The cities will own the system. We sell the kiosk docks and bikes, and the service to make sure that the whole thing is running correctly, and then help get them up and running, and support them as they continue business.

InnoLead: Tell us just a little bit about how you encourage people to think more long-term at Trek. I think we talked a while back about these five-year boards that a lot of the different engineering groups have.

Manuell: One of the things that we’ve always struggled with is making sure we’re doing the right research to supply the company with really innovative products of the future. We’ve gone through different organizational structures over time, with our R&D group.

A few years ago, we went to a standalone, “skunkworks” R&D team. The struggle with that team was creating products that the business units wanted to buy. A few years back, we combined the R&D function into the business units, and to make the R&D resource as effective as possible.

We’ve asked the [teams here] to create five-year boards. What that does is it helps us map and predict the technologies that we’ll need to fill in any of the gaps that we’re seeing in those five-year planning documents. What they really have become is more of a three-year planning document, and then a couple key people on the teams will try to fill in the last couple of years to predict where we’re going.

The boards are very fluid. They change two years out and beyond. Those products are changing constantly. We’re trying to keep up with that product mix, but the reason that boards are so important to the engineering and R&D functions is so that we can predict which technologies we need to develop to fill the holes in the planning boards. There are different, emerging technologies, things that we’re seeing. Trends that we want to work on and develop, so, that we’re ready for future shifts in the marketplace.

InnoLead: Is there an example of something that you guys have released already that came through that three- or five-year planning process, and bubbled up through one of those planning boards?

Manuell:: The Madone product (pictured at right) that we just launched this past year is probably one of the most integrated bikes that has ever been released.

[In the aerodynamic category, the] bikes are very harsh to ride. They’re heavy. There’s a lot of things that were holding them back. We went into development several years back on some technology that we thought would make that a much better bike. We wanted to still be one of the most aero bikes in that category, if not the most aero.

We wanted to ride incredibly well. We wanted to have the ride quality that our Madone has always had. We wanted to be as comfortable as our Domane.

It’s one that definitely looped through development a couple of times. We came forward with a design, and we all got around and reviewed it, and decided that it wasn’t quite good enough for what we want to put our name on yet. We went back into development a couple cycles, and we came up with a bike that we were incredibly proud of.

It’s done great in the marketplace, it’s won several awards, and it continues to be a very great bike for us.

InnoLead: Chad, you mentioned a skunkworks that you had set up, an R&D skunkworks. Tell me a little bit about that in terms of, how long did that last? It sounded like you said ultimately you felt like it was too disconnected from the needs or the interests of the different business units there. Maybe I’m misreading between the lines there.

Manuell: When that group started, it started as an off-site department. They were trying to meet the needs of, “Let’s go out and find, scrub the Earth for different technologies that we can put into our bikes, or different things that we can bring to the market.”

There was a gap in buy-in between when they developed a technology, and when one of the business units [said], “Hey, that technology is cool. Let’s put it on our product.” Or maybe that technology that they were developing wasn’t quite fitting any of the directions that the product managers or business leaders were…going.

Once we pulled that group back into the business units, the buy-in comes instantly. The business unit itself is at least peripherally aware of the technology that’s being developed. They’re already bought into it. They’re having their input along the way. They may not be the actual developer of the technology, but they’re saying, “Hey, wouldn’t it be cool if this thing would do that or this? I just rode one of these prototypes today at lunch, and it would be really neat if we could add this little thing to it.”

People are getting their input, they’re getting buy-in, and they’re aware of different things going on. In other business units, as well, the sharing happens more real-time. It’s not an after-the-fact type of thing.

InnoLead: When you say you set up the R&D skunkworks off-site, was it in Wisconsin somewhere, or was it really far off-site?

Manuell: That was just down the street, a couple miles from Trek headquarters. It was very close.

InnoLead: Would you talk a little bit about, how does R&D funding work there?

Manuell: Funding isn’t really formal. We allot a certain amount of money at the beginning of the year for all of product development, and then as the year goes on, we decide if we’re going to turn a project live. R&D projects are mixed within the production project pile of things that we would like to accomplish.

It becomes a little tricky to decide [whether we are] going to spend that money all around production projects or around R&D projects? So far, the different people who decide, the VP of product who is kicking off and approving live production projects has really been pretty hands-off with the R&D products, and projects that we’re looking at developing.Those projects go through a different approval loop, and then they require my approval, and our program manager’s approval. They’re turning live when we want them to go live, and we have teams ready to work on them, and are outside of that loop of the production and product approval process.

We’re keeping everyone informed, monthly and quarterly. We’re meeting with key stakeholders, letting them know what we’re working on. It’s very informal.

InnoLead: When you think about something that is more of a disruptive idea, or a different kind of business model like bike-sharing, or maybe like electric bikes, does it tends to come to you guys through an acquisition, or have you done some of that stuff internally, through this process we’ve been talking about?

Manuell: We’ve definitely done some [acquisitions], but in general, I think at Trek we’ve been more apt to develop the technologies internally. Things like Domane (pictured at left), which shifted the the focus of a comfort bike to being also a very sport- or race-oriented bike.

Those technologies we really like to develop ourselves. We’ll look at technologies that are available, and look at licensing them, or working with other companies where we can. Suspension is a good example of where we’ve gone out and worked with Penske to develop some really great suspension products for our mountain bike line.

InnoLead: You did mention with the bike-sharing thing, that was something you acquired into Trek after initially partnering with them?

Manuell: Yeah, that was a partnership to begin with, and Trek was making the bikes. Eventually, the way the relationship worked out, we ended up taking on a greater role in that product development process. Now, we’re developing stations, and bikes, and looking at where that whole system may go in the future.

InnoLead: We have a question from a listener. Your website allows for a tremendous amount of customization. How many customers get lost in this exploding optionality, and why not just do good, better, best, [and] simplify the options?

Manuell: That’s a fantastic question. I think it depends on the actual customer. For a lot of customers, it would be a lot easier if we just had the good, better, best options for them to decide from.

We wanted to give them additional options, [like] putting their name on their top tube or having a paint scheme that no one else in their group will have, or adding a different set of wheels than what might normally [come with it.] If the bike has a lot more options to do things to really customize it, that’s a product that they’re going to spend a lot of time riding, maybe alone or with a big group of friends. We’ve definitely seen people that really enjoy the additional options, but we’ve also heard that it can be confusing for people that aren’t as familiar with all the options…

InnoLead: Let’s take another question here. Are there companies and other industries that you guys look at as benchmarks in terms of how they do product development and R&D?

Manuell: There are definitely a lot of companies that we look at pretty closely, Apple being the big one. Looking at the simplicity of their design, that’s always an inspiration. If you look at our most recent Madone, I would think that you could probably pick up some of the Apple inspiration in that product, just trying to hide as many cables and as much of the technology as possible. Just make it look really, really simple, but still be a very complex product.

InnoLead: Next question… How do you follow trends like the cargo and kid-carrying bikes from Europe that people here in Boston and in San Francisco seem to love?

Manuell: We have product managers, industrial designers, and engineers that are going out and traveling to different areas that may have trends emerging. We have the design team in Europe that’s looking for trends that are happening over there, and we’re constantly talking back and forth about whether we think those trends will travel to different markets, or emerge in different markets.

We’re listening to our sales force, and information coming in from the sales channels, the dealers, and just really trying to predict what things are going to be big hits, what things might fizzle out. There’s people that all day, every day are spending their time looking at those types of things.

InnoLead: The next listener question is about the Internet of Things. The question is, why should bikes become a full-fledged member of the Internet of Things? I guess this is somebody who has a strong perspective, but maybe is curious how you think about the bicycle as a connected device…

Manuell: There are a lot of ways that I think it could play out on the bicycle, from knowing when your bike needs to be serviced, to knowing when your air pressure in your tire is low, to knowing when new products may become available for the particular bike you’re riding.

[We think about a] car knowing that a bike’s riding right next to it — and maybe put down a cell phone or whatever to not be distracted.InnoLead: The next question is about social media. Do you guys monitor social media in any interesting ways to see what people want, or what they’re saying about the products today?

Manuell: Yeah, we’re definitely monitoring social media. It’s one of the avenues we have for information flowing in to us, both how people are accepting our products, or not accepting them in the field, and how other products are being reacted to. We’re trying to put feelers every place we can, and social media is just one of those places we can turn to.

InnoLead: What have you found about what motivates your team members, and what kind of incentives for innovation or R&D work?

Manuell: I think we’ve got an advantage in that area, because…if you’re going to be successful at Trek, you’re going to love cycling. The thing that really motivates most people here in product development roles is just developing a product that they would love to ride themselves.

There’s nothing better than designing a product, and then getting to go out and have that be your form of exercise and enjoyment, and your pasttime. That’s just a natural incentive for designers and engineers.

InnoLead: Are there some formal recognition or reward programs that you guys have put in place, or things you experimented with?

Manuell:…Obviously, the way we pay people. We have President’s Awards that are given out at our president’s quarterly updates to the company. [We try] to say, “Thank you,” and talk to people about the great products they’re developing, thanking them in creative ways, whenever possible.

InnoLead: Let’s just get in one last question here about – let’s try to combine two questions here. It’s about the way smartphones will be used in conjunction with cycling, and there’s another question about Kickstarter projects, and crowdfunded projects, and whether you look at those, and whether you’re interested in trying crowdfunding.

Manuell: Smartphones have definitely become a great tool for cyclists to map their ride, map the ride they’re going to take, record the ride that they’ve taken, and then interact with their speeds, and altitudes, and all sorts of different things that they may not have had access before the smartphone and the apps that they are using today.

[With regard to crowdfunding, we use it] more from the standpoint of a research tool, and definitely we are buying products that we think are interesting, and trying to stay in touch with what is being developed in that arena. We haven’t used it from the standpoint of looking to get funding for the development of a product, or to see if people are interested in us developing a product yet